The Government has dropped controversial plans to cut housing benefit for long-term dole claimants.

Work and Pensions Secretary Iain Duncan Smith announced the move as he prepared to unveil details of the most radical welfare shake-up for a generation.

The 10% cut in housing benefit for anyone on jobseeker's allowance for more than a year had been due to take effect in 2013. But Mr Duncan Smith said it had been ditched from the Welfare Reform Bill.

He told BBC Radio 4's Today programme: "You won't see this in the Bill for one very good reason - all of those people were going to move on to the Work Programme anyway, so they would be having intensive help to get them back to work."

Mr Duncan Smith denied reports that the idea was blocked by Deputy Prime Minister Nick Clegg and other Liberal Democrat ministers. He also insisted that no benefit claimants would lose out as a result of the new changes.

He said: "Nobody will be worse off because every single person, as we migrate them on to this new credit, will be cash-protected. That means that whatever system you are on, we will stay at that level whilst the new system is set." Nearly a million people will be lifted out of poverty as a result of the changes, he said.

Mr Duncan Smith is to launch the reforms at an event in London with David Cameron.

The Prime Minister will warn that people can no longer be trusted to claim only the benefits they need, saying a "standardised" system of sickness and unemployment handouts was sustainable after the war because people felt "shame" when they abused it.

However, "perverse incentives" introduced over the years have undermined aspiration and "collective responsibility", and left the taxpayer with a multibillion-pound burden.

The new plans include replacing most existing benefits with a universal credit, designed to ensure people are always better off when they are employed, and close the loophole where some couples receive more living apart. Those who refuse to take up job offers face losing their handouts for up to three years, and there will be tougher sanctions for fraud.